According to a new study, the two Antarctic glaciers – the Thwaites Glacier, also known as Doomsday Glacier about the size of Great Britain, and the slightly smaller Pine Island Glacier – are melting so fast that they are now losing ice at a faster rate than any time over the past 5,500 years. This occurrence is due mainly to global warming and climate change that have seen dramatic rise in sea levels. The rapid retreat of these two glaciers could reduce the size of the West Antarctic Ice Sheet and could potentially contribute as much as eleven feet to global sea level rise over the next several centuries. In the last 40 years, the Thwaites Glacier lost around 595 billion tons of ice, contributing to a four percent rise in sea levels. (https://www.usatoday.com/story/news/world/2022/06/15/antarctica-doomsday-glacier-ice-melting/7638814001/).
Last week, we began a discussion of Guyana’s Extractive Industries Transparency Initiative’s (EITI) third annual report covering the year 2019. The two previous reports highlighted significant deficiencies and non-compliance with several of the requirements of the EITI Standard that led the Independent Administrator to conclude that he was unable to determine that all significant contributions made by extractive entities to the revenues of Guyana were included in the report.
. So far, we have examined five areas, namely, (i) payments made by extractive sector to the relevant government agencies; (ii) contributions to the economy; (iii) production data; (iv) data submission; and (v) data reliability. As regards (i), the Independent Administrator again concluded that it was not possible to determine that all significant contributions made by extractive entities to the revenues of Guyana were included in the report; while in relation to (iv) and (v), he stated that, given the significance of the findings contained in the relevant sections of the report, it was not possible to determine that the financial data submitted by reporting entities and included in the report were subject to audits that have been performed in accordance with international standards.
In today’s article, we complete our review of the third annual EITI report. The EITI Standard requires the publication of a comprehensive annual report disclosing fully all payments made to government agencies by the extractive sector. The main objective is to help in the understanding of the level of contributions of the extractive sector to the economic and social development of Guyana and to improve transparency and good governance in the extractive industry.
Reconciliation of cash flows
Based on the data collected from extractive entities and government agencies, amounts totalling G$68.30 billion were paid to government, of which sums totalling G$49.02 billion, or 71.8% relate to the Guyana Revenue Authority (GRA). Seven oil and gas companies with active licences were selected in order to reconcile the amounts shown as having been paid to government agencies, with the amounts received by those agencies.
Of the amount of G$12.43 billion that the government agencies reported as having been received from of the above companies, a net unreconciled difference of G$1.2 billion remained, after adjustments and reconciliation. This unreconciled difference represents 9.7% of payments to government agencies and was due mainly to: (i) GRA receiving G$1.4 billion more in tax revenue from the extractive entities than payments reported by these entities; and (ii) non-submission by government agencies of reporting templates for G$173,847,889.
Status of implementation of previous recommendations
The previous two annual reports highlighted significant deficiencies and non-compliance with the EITI Standard. These include:
Lack of systematic publication in a centralized platform of data on revenues collected, contextual information on the extractive sector, and budget allocations. The Guyana Forestry Commission’s annual reports contain relevant information addressing the contextual information on the forestry sector. However, this information was not yet accessible as an open data portal. A similar observation was made in respect of the Guyana Geology and Mines Commission (GGMC) and the Department of Fisheries;
The registers provided by the GGMC did not systematically include details on the licenced area. The Commission had set up an online map listing all mining permits and licences, and the portal provides certain details, updated quarterly. However, there was a lack of centralised mining cadastre that includes historical data and a summary of all the concessions/licenced coordinates in a single national data system, including the required level of details;
The EITI Standard encourages MSGs to publicly disclose all mineral agreements entered into force prior to the reporting period. The Guyana Mining Act does not preclude such disclosure. However, mineral agreements were not accessible online;
Reporting templates were not adequately prepared since specific details to facilitate reconciliation were not included. Several reporting templates were also not signed by the management or certified by an external auditor;
GRA is not allowed to disclose information on individual taxpayers to unauthorized persons. As a result, it did not provide payment receipts from the extractive companies as well as their identities. GRA’s recording system is also not integrated with that of GGMC. It was therefore not possible to match the list of taxpayers with that of licence/permit holders in order to ensure comprehensiveness of the extractive revenues collected by GRA. Additionally, several extractive entities and government agencies did not provide copies of their audited financials for the period under review;
Government agencies did not include the Taxpayer Identification Number (TIN) to identify all the payments of the same taxpayer, and the names of some taxpayers were spelt differently from one payment record to another in the records of the same agency. GRA would be unable to match the list of licenced extractive entities with its records, without unique identifiers such as TIN, dates of birth, addresses, and national identification numbers. These weaknesses have led to difficulties during the reconciliation exercise;
Several mining permits covering plots in the same location were awarded to the same applicant. When taken together, these permits to the same applicant exceeded 1,200 acres which is the maximum surface for a medium scale mining permit; and
The Amerindian Act requires the GGMC to transfer 25 percent of the royalties from the mining activities to a fund designated by the Minister for the benefit of Amerindian villages. However, the Amerindian Development Fund was fully funded from the Government budget without showing any specific revenues from the extractive sectors.
In order to remedy the above deficiencies/shortcomings, several recommendations were made. Table I shows the status of implementation of these recommendations:
Table I
Status of implementation of previous recommendations
# Recommendation Current Status
1 Systematic disclosure of EITI dataSet up roadmap on the implementation of an open data that centralises all EITI data; Implement and upgrade a cadastral system with adequate details such as data about valid licences, coordinates, licencee and the beneficial owners of the companies; andEnhance the current management information systems of the government agencies involved to allow, among other benefits, systematic publication of the required EITI data. On-going: Ministry of Natural Resources signed a contract to implement a database platform. An initial assessment was completed, and work commenced on developing the software. However, due to COVID-19 restrictions, implementation was delayed.
2 Public disclosure of a register of licencesUndertake an inventory of all active licences to complete all relevant details for each license; GGMC to ensure that the cadastre is kept up-to-date and all data on licences are systematically recorded therein; The register of licences and permits to include TIN of current licence holders to facilitate the corroboration of data on the payment lists as well as communication between government agencies; and Develop a public cadastre that includes systematically all the required details for each type of licence, including the licence holder details, the coordinates, the type of mineral extracted, application date, granting date, expiry date, corresponding production details, and royalties paid. On-going: Guyana Gold Board has undertaken to hire a consultant to revise their computerized system. GGMC is also in the process of creating a cadaster system that will allow information to be collected and easily retrieved for EITI reporting.
3 Public disclosure of mineral agreementsThe MSG to set out a short term-work plan for the electronic publication of all mineral agreements in the mining sector to include: Defining how the electronic publication of mineral agreements can be undertaken using Guyana EITI website; Steps required for all mineral agreements to be published electronically and how to make these accessible to the public;Realistic short-term timeline as to when such data could be available; andPerforming a review of the institutional or practical barriers that may prevent such electronic publication. No progress: GGMC has confirmed that the mineral agreements are not yet available online.
4 Accuracy and comprehensiveness of data included in the reporting templates:Conduct workshop with reporting entities to raise awareness on the importance of the EITI data they provide and to ensure due care is paid in preparing reporting templates; Distribute reporting templates and discuss importance of satisfying submission deadline; and Establish a register of reporting entities and monitor submission timelines and any foreseeable deviations. On-going: Workshops were held with government reporting entities and oil & gas companies. However, the same weaknesses were identified during the data collection for the preparation of 2019 report.
5 Waiving legal confidentiality provisions:MSG to set out a roadmap with the relevant government agencies to amend the Revenue Authority Act and the Income Tax Act to remove any confidentiality constraints and to allow the public disclosure of data relevant for EITI reporting including the following: Reviewing all relevant existing legislations and identifying areas relating to confidentiality issues; Listing any restrictions observed; andFormulating and submitting recommendations to the Ministry of Natural Resources to remove any existing restrictions which hinder the full satisfaction of the EITI Standard. On-going: Confidentiality restrictions remained a legal barrier in ensuring that revenues from extractive industries have been comprehensively disclosed. The MSG sent a letter on 12 April 2022 to the Minister requesting his intervention.
6 Data quality and assurance:Build capacity to better understand best practices in data quality and assurance in EITI implementing countries;Emphasize the importance of complying with this provision of proper signature and certification of templates by auditors. Efforts should also be made to ensure that reporting entities are adequately notified about the requirements; Identify possible sources for verification of accuracy of financial data provided for use in preparation of EITI Reports; andRecommend, to the MNR, measures and actions to be taken to enhance data quality at all levels. On-going: Workshops were held with government reporting entities as well as oil and gas companies. However, there was a lack of management sign-off and audit certification for several reporting templates.
7 Use of unique identification number for all government Agencies:Government agencies should keep records of the TIN rather than using names or different reference numbers for identifying taxpayers. The MSG may consider: (i) studying existing revenue collection system with a view to recommend the use of a unique identification numbering order for all Government Agencies; and (ii) making recommendation to the Ministry of Natural Resources to implement a unique identification numbering system for all government agencies. No progress. (The report did not comment further.)
8 Allocation of licenses and permits:Develop a policy for GGMC to perform an inventory of the active permits and licenses in order to include the clear definition and distinction between large scale licenses and medium scale permits;GGMC to consider what action needs to be taken when the combined acreage of contiguous plots to the same applicant exceed the 1,200 acres threshold; andIn order to address the under-exploitation of mining licences covering large plots by investors that might not have the required technical and financial capacities, GGMC should apply a tendering process for awarding mineral agreements. No progress: Several mining permits covering plots in the same location and awarded to the same applicant, were noted.
9 Extractive revenue management and expenditures: Government agencies to implement automated controls to ensure the comprehensiveness of extractive revenues earmarked to be transferred to Amerindian Development Fund; and The MSG to set up a work plan with different government agencies involved in the extractive sectors to consider any extractive revenues that should be earmarked for specific programmes or geographic regions. (Report did not comment on the status of these recommendations, presumably because they are new.)
Report’s concluding remarks
The MSG is required to take steps to act upon lessons learnt; identify, investigate and address the causes of any information gaps and discrepancies; and consider the recommendations resulting from EITI implementation. The report concluded that continued inaction on some of the recommendations: (i) stymies progress in meeting the requirements of the EITI Standard; (ii) impedes preventative actions to correct and address discrepancies between declarations by government agencies and the extractive entities; (iii) adversely affects the data quality and comprehensiveness of the disclosures, which may reduce the public’s confidence in the report’s data; and (iv) compromises the fundamental purpose of EITI open data being a tool for government in improving policy-making and sector management.
